A wire circuit to it's breaker needs repaired

I've been investigating my breakers and found one set of cabling is just downright messed up. This circuit goes to the bathroom. I wouldn't think the original owner would have added this circuit but I am just shocked that the original installer would have done it this way. Doesn't make sense but I need to fix it.

Here's the neutral_white wire with nicks in it, I think there's a third on the back side.


Here's the ground wire, snipped, curled around an extension piece.


Here, the black_hot wire has electrical tape along a good portion of it. I have no idea what it looks like underneath.


Now my question is; what is an acceptable repair?
Does a junction box need to be installed just before the main panel where the wires can be joined with new there, then to the breaker.
Or
Can a butt splice repair be made in the panel?
Never seen a butt splice repair made in a panel before so I am gonna guess that's a nono.

Thanks in advance for any advice.

 

Heat shrink could be slid over the conductors if there is no damage to the conductor itself. New wires could also be spliced to an undamaged section using wire nuts.

 

Looking at your wiring there and that white wire too.... it looks like some high heat damage. Look closely.... does the insulation look melted on some of that wiring ?

 

The ground wire should be properly spliced with a wire nut.

 

Excellent idea. I'll unravel it and check for damage. Then heatshrink it.
I'll heatshrink the white too.

I'll wire nut the ground.

I thought the white looked like it had heat damage too but those are definitely slits on it. I don't know if maybe some dirt/wood particles got in there when the wires were pulled, but I'll take a closer look to see that it's not melted or burnt.

Geez I tell ya. It's a wonder that there aren't more house fires out there. Just can't believe this kind of stuff can pass two inspections. Just amazing.
And if I hadn't opened up a book on home repair, I wouldn't have been any wiser to noticing something is amiss...

Thanks for the help all.